Better left to a bankruptcy judge

What they think - My Word - 2 views on the auto bailout

December 23, 2008|By Matthew Helms, Special To The Sentinel

This holiday season, the U.S. government has decided to give General Motors and Chrysler $17.4 billion.

The Big Three automakers are an important part of our economy. They are responsible for providing millions of jobs. They are a major part of our manufacturing base, and their deaths would have a widespread negative impact on our economy. Something needed to be done so that the they can once again be competitive.

Unfortunately, handing them billions of dollars and the help of a car czar will be a failure. The Big Three are being smothered by union contracts that drive up labor costs. The industry is being dragged down by inefficient and ineffective management. And the addition of a government-designated car czar is nothing more than an attempt by Washington to put another bureaucrat in charge of private industry.

The contracts between the United Auto Workers and GM are driving GM and the other automakers into bankruptcy. The average labor cost, which includes salary, benefits and benefits paid to retired workers, was $69 per hour in 2007 for GM, while Toyota paid an estimated $48.

Union contracts allow GM workers to participate in the "jobs bank" program, where they are paid not to work. They can enter this program if they are laid off or their plant closes. In this program, workers are paid 95 percent of their base pay, plus full benefits. Under the previous UAW contracts, workers could stay in the program for an unlimited amount of time. Under the new contracts, they can stay for two years.

Until these contracts can be renegotiated so that GM is on more of an even playing field with foreign automakers, no amount of money will solve its problems.

As high as labor costs are, inefficiency and ineffectiveness of management at GM are far greater problems. Top executives at GM have been unable to turn around an American market share that has been shrinking steadily since the early 1960s.

It's sad to say about an American icon, but the answer is Chapter 11. If the Big Three cannot support themselves without the help of taxpayer money, then they must be allowed to go through bankruptcy.

A bankruptcy judge, not a car czar, would have the power to force the UAW into concessions that would help put the industry back on the road to profitability. A bankruptcy judge would have the experience and the expertise to force the much-needed restructuring of these companies. Without new union contracts and massive restructuring, any handouts given to the auto industry could be added to an already staggering amount of wasted taxpayer money.

Bankruptcy would not be the final step in the failure of the American auto industry but the first step in getting it back on its feet. The American economy needs the auto industry, but it needs it to succeed. A $17.4 billion Christmas present will ensure nothing but the lack of change that will lead to its continued failure.